Company insight


Drive cost optimisation and efficiencies: Market- facing expenses and fees


High market-facing fees such as brokerage, clearing and execution expenses can have signifi cant impact on a bank’s profi tability, so all fees and expenses must come under the microscope. With its Fees and Expense Management (FEMS) solution, SmartStream enables easy tracking and control of these costs, so Future Banking asked its FEMS solution manager Bharat Malesha how this is done.


A


s with any business, running a bank comes with a long list of costs – some obvious, others more


opaque. All, however, carve into profit margins, so it is essential to bring every cost into the light to ensure that it is understood, monitored and, ultimately, managed effectively. Every year, the financial services industry spends billions of dollars on variable expenses, and transaction fees constitute a significant proportion of them. Nevertheless, these brokerage clearing and execution (BC&E) costs are often not fully recognised as an area where efficiency can be improved and savings made.


Bharat Malesha, FEMS solution manager, SmartStream


continues. “They can see the options that are available to them. The problem is that processes are so fragmented in the banking industry that the right information is not readily available. Normally it is collated at the end of month or two months after the fact, and the data is stale by then. So, there is an urgency around fees and expenses,


“Usually, [SmartStream’s] competitors focus on a particular asset class, but we can deliver an enterprise-wide view of BC&E costs. That is what sets us apart.”


“We manage execution costs and market- facing fees, and at any point in time it is important for a bank to understand its cost base, have transparency and have true integration of those costs into its books and records,” says Bharat Malesha, executive vice president, fees and expense management at SmartStream. “Those costs must be tied back to the right businesses, so that our customers can manage their operations more efficiently and maximise client profitability.”


“Once they have that transparency, they can see whether they are optimally executing in the market,” Malesha


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and it is important to get information in near real time.”


Transformation begins with transparency


Banks are undoubtedly missing the opportunity to measure and optimise their spend, as their ability to recognise and achieve savings potential is restricted by the completeness and accuracy of the information it uses to substantiate spend analysis. Now, however, there is a path towards transparency that can help financial services organisations to manage previously hidden costs in an optimal way.


SmartStream’s Fees and Expense Management (FEMS) solution has already helped many leading banks to reveal the true extent of their BC&E costs, and find a way to realise considerable savings through effective cost management strategies. Along the way, that vastly improves accounting and invoice control to drive savings to the bottom line – and ultimately enhance profitability.


The FEMS platform and SmartStream’s range of related services provide banks with a best-in-class solution for expense and revenue efficiency, relying on near real-time reporting on daily volumes and expense levels, which allows desks to maximise the impact of existing fee caps and volume tier discounts.


Furthermore, the solution provides transparent and granular-level data to regulators when orders are executed, ensuring a bank adheres to best execution practices. A multi-dimensional, division-level expense view delivers cost transparency across fee categories, enabling business and client profitability measurement. “Usually, our competitors focus on a particular asset class, but we can deliver an enterprise-wide view of BC&E costs,” Malesha says. “That is what sets us apart. If a bank is using a vendor or third-party service provider, including brokers, exchanges, clearing houses, agent banks or custodians, and needs to understand its total spend with a provider – whether for equities, fixed income or any other asset class – we can bring the whole spend base together.”


Future Banking / www.nsbanking.com


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